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The Directions on Microsoft Briefing Podcast
What Microsoft's Recent M365 Bundling Moves Mean for You
00:17:00
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- [00:00]
A
Foreign. For the past decade, almost since Microsoft began selling its E5 office suite, customers have been wondering whether a more comprehensive and an even pricier so called E7 was waiting in the wings. Given the pace at which Microsoft's been rolling out separately priced add ons to its Office 365 and Microsoft 365 plans, the E7 idea made a lot of sense. Some thought it was even more likely once Microsoft unveiled its biggest add on of them all, Microsoft 365 copilot, which, as you all know, is priced at $30 per user per month. So the thinking went, why not make Microsoft 365 Copilot the centerpiece of a new E7 suite? But late last year, Microsoft started shuffling the E3 and E5 decks in a way that made an E7 look less likely, at least for the near term. What's this all mean to customers? Today's podcast will explore that very topic. Welcome to the Directions on Microsoft Briefing Podcast. I'm Mary I'm Mary Jo Foley, the editor in chief here at Directions. I'm your host for this series of podcasts for those interested in the Microsoft Enterprise IT ecosystem. To talk about what Microsoft is doing on the feature bundling front, we've got Directions analyst Wes Miller, who covers Microsoft security identity management and systems management technologies. He also previously worked at Microsoft as a Program Manager in the Windows Core Operating Systems division and and for Winternal Software, which was acquired by Microsoft in 2006. Hi Wes, thanks a lot for joining the very first directions podcast for 2026.
- [02:05]
B
Thank you for having me and Happy New Year.
- [02:08]
A
Same to you. Okay, I saw that you just published a couple of reports for Asset Directions on Microsoft's announcement late last year that it would be bundling some intune features with E3 and E5. Could you give us a quick rundown on the significance and particulars of that announcement?
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B
Sure. In a nutshell, Microsoft had been building up a bunch of things on top of Microsoft 365E5 even that were add ons on top of things that people traditionally bought. So Intune was normally included in all the tiers of Microsoft 365, all the way down to the frontline suites. And this Intune suite and intune plan 2 sat above all of that, and that was one of the things that made us think it was going to go into an E7 because it was not alone. There were add ons similar to that for Microsoft Defender and Entra id. So what we had was this set of things that Microsoft felt Well, there's more value than we want to just put in E3. So we're going to make it on top of E5. And the challenge with that, as you and I know, is that a lot of customers don't have Microsoft 365 E5. So what I saw over the last year and a half, two years was as this set of features congealed, Microsoft really seemed to be struggling with getting customers to adopt them. And I think a lot of the problem was that again, a lot of customers weren't on E5 and they were asking quite a bit of extra money for these intune features. And so what we really saw Microsoft do was almost, it's a thing we rarely see them do, which is put some money back on the table and take these features and shove them down into the two layers of Microsoft 365 E3 and E5. And we'll, we'll chat about that as we go. But you know where Microsoft giveth, Microsoft taketh away. They did that. But they also are raising the prices of pretty much every Microsoft 365 and Office 365 suite at the end of this fiscal year. So in July. So it's, you know, it's good news. Now we got a good news, bad news kind of thing. But we're heading into it. I think overall this is a really interesting piece of good movement for Microsoft customers.
- [04:22]
A
Yeah, I was going to ask you about the price increase because obviously when Microsoft adds features to something, it's not because of the goodness of the execs collective hearts. They're going to increase the price of E3 and E5 by $3 per user per month each. So E3 is going to cost $39 instead of $36 and E5 will cost 60 instead of $57. But you do get these new intune features you're talking about and co copilot Chat if you care about that. But not Microsoft 365 copilot itself, which still stays $30 per user per month.
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B
Right.
- [04:56]
A
So you, you get these features whether you want them or not and you have to take the price increase. So I'm guessing customers are still going to have to do some math. Right? Does the addition of these features mean you should buy more E3 or E5 for your users? Or do you still make out better by adding these features as add ons? What are you telling customers they should be thinking about?
- [05:16]
B
In general, I'm really highlighting the fact that E3 as it is, the price went up but the reality is Microsoft's prices normally, Microsoft 365e5, when they did their price uplift three years ago, almost four years ago, that was the only one that sat still. These price changes, unfortunately, they're not new. They're not something that. It's a result of current economic climate. Microsoft just raises prices periodically. And yes, that's obviously to help shareholder value. But when we look at that, I think Microsoft 365E3, these new features, there's more value added than the price that they added. So I think there's more than $3 worth of value that Microsoft put in. And the same is true of E5 when we look at that. And the Copilot Chat thing, you can go into that with David and chat about it. The reality is there's a lot of value there that I think customers shouldn't just look away from. So I think there's, there's enough here that the customers should, should reassess. I still think, as you and I have often discussed, that E5 is going to be something that a lot of customers are going to kick the tires and walk away from just because they're not. They're still not ready to pay that now, even higher premium.
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A
Right, Right. And then I saw in your report, there are a couple of caveats that we should talk about, too, like academic users and Frontline users are not eligible for this offer, I believe. And then the features that are now being bundled with E3 and E5 won't be available for things like Microsoft 365 E5 Defender or E5 Purview suites.
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B
Right, right. All of those are true. So these are purely being added to Microsoft 365 E3 and E5. None of the Office suites, none of the Frontline suites, and none of the standalone. What would have classically been E5 compliance and E5 security, the defender and Purview suites like you mentioned, you don't get any of this with those. You have to buy the full suite. And Microsoft is clearly using this as a negotiation gambit. Listen, there's more value in the box, but you can't buy piecemeal for now.
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A
Okay. All right, on that note, let's take a quick break so that I can talk about why you should make it a priority this year to go to one of our directions on Microsoft licensing and negotiation boot camps. As of November 1st last year, Microsoft eliminated tiered volume discounts for online services in the Enterprise agreement and Microsoft Customer Agreement. So unless you're prepared, this change could mean you're facing a potential 6 to 12% increase on your core Microsoft Cloud services like Microsoft 365, Azure Dynamics 365 and more. So what should you do? Your best defense is to invest in Microsoft licensing expertise. Our next in person directions on Microsoft licensing boot camp is happening in Los Angeles February 3rd to 5th, 2026. You should send your IT procurement and ITAM leaders so they can learn how to deal with the new Microsoft licensing realities. You'll learn things like how to control your Azure consumption costs so that you can cut your largest Microsoft cloud spending component will help you master the strict licensing rules for high cost products like copilot and Microsoft 365 add ons like we're talking about here so that you can ensure compliance and maximize your organization's ROI without overbuying. And we'll help you craft a tailored framework for your renewal strategy to secure concessions that'll help offset lost volume discounts. If you want to get your spot secured today, go to directions on Microsoft.com training. You'll get to talk to Wes there and other Directions licensing experts. And if you can't make it to Los Angeles in February, we've got other boot camps coming up in Washington D.C. and Chicago in the coming year too. All right, back to WES and to E7 or not to E7 actually right now, no E7. Okay, let's. Let's say in a nutshell all these things we've talked about so far, Wes, are they good news or bad news for customers or a little bit of both.
- [09:32]
B
And why I think in general this is really, it's, it's pretty positive news. The negative news, if we take that piece, break it out separately, there's a price increase period.
- [09:42]
A
Yeah.
- [09:43]
B
And for, for academic customers right now to a degree, for government customers because some of this technology is not available yet. And then for Frontline users. But the reality is a lot of these things don't really apply to Frontline users. So there's not a big gap there. These most of the features that we're talking about here, which I' get to in a second, most of those features are things that really add value. If you have a user tethered to a PC is one of those things that Microsoft will generally refer to, you know, a user having affinity to a PC. And if you have these Frontline users, they don't usually have a PC that's theirs. They're sharing it with someone or there are people throughout the day that they're swapping out their seat with. So when we look at these features, I think in particular Remote Help which was added to Microsoft 365 E3 people who've been in the industry a long time will tell you there are a lot of mature solutions that have been doing this for a long time that are better. And that's probably true. In fact I know it to be true. But this is going to be one of those things where it's really hard to UNBUNDLE Microsoft. So E3 including remote help. Now it's sort of a no brainer to at least say hey let's go kick the tires because it's actually in the box and the thing most of us buy similarly with Advanced Endpoint Analytics. I don't think the features of that are as valuable as Microsoft has historically sold them, but I still think it's positive. When we look at the other three things that are included in E3 now, they're all Plan 2 features and as I mentioned in previous reports on intune at directions, all of those things generally only matter if you've got a user who's got an embedded device of some type, like an embedded Android device that they're using like as a mechanic or on a manufact manufacturing floor. When we look up in E5 that's where things start to get interesting. Endpoint privilege management in particular, which is the ability for you to escalate privileges and have users running as non admin normally but escalate things so they can actually install without creating for example a help desk ticket. All of that's in E5 now and up there that's where clearly Beyond Trust is the market leader. And every time I chatted with a customer they're like yeah, but we already use Beyond Trust and Microsoft is asking so much money for this. So at least again now there'll be this versus that. The reality is I still think Beyond Trust today is at least the solution they sell. I don't know how well it works in practice, but the solution they sell is much more comprehensive than Microsoft's but I think this may be good enough for a lot of customers and the cloud pki similarly, a lot of customers were looking at and saying well it's interesting but I'm not going to pay the premium just to get that set of features. So I don't have it all of these things being added into Microsoft 365 now. I think it's really a net positive for customers because you don't have to buy this thing on top of E5 particularly when everybody's budgets are so strapped.
- [12:45]
A
Right. Exactly at directions. We have this concept that we call batteries not included. And what we mean is Microsoft's been rolling out features that aren't part of the base E3 or E5 suites and they're separately priced add ons. So things like the Defender and Intune plans, the Purview plans, all these things. Some customers assumed of course they'd be an E3 or E5. They were not. So we call those batteries not included. I'm curious if you think this new announcement by Microsoft about Intune features coming to E3 and E5 means the batteries not included era is over.
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B
I'm not sure it's over. Microsoft has had for a while, like you said, they've had this just expansion idea of add more, add more. And I don't think that's necessarily going to change. But I think particularly when we look at the financial pressure that Microsoft themselves has put themselves under with all this AI movement, I think we're going to see a lot of harmonization where they have, you know, 1,001 offerings that they're probably going to look at going we should streamline these sorts of things. We shouldn't have 15 different tiers because you have to have teams that support all these things. You have to have teams that break these out separately. And I think we're going to start to see some streamlining that's actually beneficial for customers. That said, this year's uplift probably the first we'll see of, you know, maybe another price change in another two, definitely three years. But I think this could be the start of a positive move. There'll still be batteries not included, but hopefully we're going to see that become less of a problem over time.
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A
Okay, so I was going to bring that up because these Intune features are not the only example of Microsoft rolling out more functionality into an existing product or service. So I know in the case of Microsoft 365 copilot they're adding for quote, no additional cost. They're researcher and analyst agents. And that's the way you get that now is you have to buy Microsoft 365 copilot and you get researcher or analyst and or analyst. So I'm thinking we're going to see other agents from Microsoft still be priced as separately priced add ons. But I'm wondering if you agree and kind of what you're expecting around Microsoft's agent licensing and pricing this year and beyond.
- [15:09]
B
I think you're right. And one of the other things too I would bring up is SharePoint Advanced Management, which David wrote that great report about. And you know that's it's still available as a separate add on, but you need it if you're using Copilot for every one of your licensed Copilot users to do that Advanced Management, the things that have always been a challenge with SharePoint are a little bit better with that. So you're right. There's a lot of stuff being added all over the place and I think they're just, they're trying to make it more appealing because Copilot is, it's got to be a hard sell for them right now, again, especially with all the Copilot chat value they're throwing in the box. So. Yeah.
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A
Yep. Yeah. Sweeten the deal, right? Cool. Well, thank you Wes so much. It's always great to get your input on all things Microsoft licensing related. So thanks.
- [15:58]
B
Thanks again for having me.
- [15:59]
A
Sure. I want to remind our listeners they can find lots more coverage of all things Microsoft related on directions on Microsoft.com thank you for listening. If you have questions, comments or any specific topics you would like to hear our analysts cover in one of these podcasts, please do not hesitate to contact me via Xor Blue Sky. Directions on Microsoft is on LinkedIn, so make sure you follow us there and give us a follow at DirectionsMSFT on X or or directions on Microsoft on BlueSky for all of the latest Microsoft pricing and licensing information. Thanks again.